Independence Air is on the verge of losing its independence as a liquidity crisis threatens its attempt to create the first low-fares regional jet operator.
A United Express feeder until June 2004, it struggled through its year of independence while rivals such as former partner United Airlines aggressively matched its fares and routes. After losing $202 million in the first half of this year, parent FLYi Inc was down to just $66 million in cash, warning that it would have to reorganise unless it raised “significant funds”.
Formerly Atlantic Coast Airlines, Independence began service from Washington Dulles with more than $300 million in cash and a forecast that it could be profitable this year. However, it has returned a third of its regional fleet, trimmed routes, raised fares, and sought manufacturer financing.
Although its load factors have risen, they lag the industry average, and the carrier faces a $1.5 million FAA fine on maintenance. Last month, it deferred delivery of six more Airbus A319s, which will net it a $31.2 million refund on deposits. Airbus also agreed to waive $28 million in debt. This is the second time Independence has deferred A319 deliveries. In November it put 10 aircraft back from 2005 to 2007.
Independence will depend on the 12 A319s it already has for much of its capacity into the low season, chairman Kerry Skeen told analysts. It has used the A319s for longer routes to Florida and California, but has faced an aggressive response. Its actions will probably not be sufficient, says Raymond James analyst Samantha Panella. She thinks FLYi will have a negative cash balance of $37 million by year-end unless its files for Chapter 11 this quarter – which she and other analysts expect.
Skeen would not rule out bankruptcy “or any other option”. He says the carrier is taking “all necessary and prudent steps” to enhance its liquidity. “We have a tough time ahead, but we have a number of sources of cash and we are in discussions with third parties for financing,” he told analysts.
Source: Airline Business
